SPS Commerce as a Case Study
Roughly $2 trillion in software market capitalization evaporated between mid-January and mid-February 2026. The IGV ETF, which tracks North American software stocks, dropped nearly 30% from its September peak. Forward P/E ratios across the sector collapsed from roughly 35x to 20x: levels the market hasn’t seen since 2014. Jefferies coined a term for it: the SaaSpocalypse.
The catalyst was a series of AI product launches, most notably Anthropic’s Claude Cowork and its expanding library of enterprise plug-ins for finance, legal, HR, and operations, that forced the market to confront a question it had been avoiding: what happens to traditional software when AI agents can do the work that software was built to support?
Gartner’s February 2026 forecast projects that 35% of point-product SaaS tools will be replaced by AI agents by 2030. The per-seat pricing model that powered SaaS growth for a decade is under direct pressure when AI agents reduce the number of humans who need seats. Every established SaaS TAM (CRM, HR, legal tech, financial analysis, project management) is now up for grabs.
The market isn’t punishing software companies for having bad products. It’s punishing them for having addressable markets that appear to be shrinking. The only path back to a healthy multiple is to make the TAM dramatically bigger in ways the market can actually believe.
No company illustrates both the challenge and the trap better than SPS Commerce.
100 Quarters of Growth. A 75% Stock Decline
SPS Commerce is the dominant player in EDI: the decades-old protocol that still underpins the vast majority of B2B commerce transactions. EDI is the plumbing that moves purchase orders, invoices, and advance ship notices between retailers and their suppliers. SPS has built a formidable business here with over 45,000 recurring revenue customers connecting to retailers like Amazon, Walmart, and Target. The company reported $751 million in revenue for 2025, up nearly 18% year over year. It delivered its 100th consecutive quarter of topline growth – a streak that very few software companies in any category can match.
The stock tells a completely different story. SPS Commerce hit an all-time high of roughly $215 in July 2024. As of late February 2026, it’s trading around $56: a decline of nearly 75%. Morgan Stanley lowered its price target. Craig-Hallum downgraded to Hold. Activist investor Anson has been pushing for a potential sale of the company. The $210 million acquisition of Carbon6 Technologies, a provider of revenue recovery tools for Amazon sellers, was undermined by subsequent Amazon marketplace rule changes, raising questions about capital allocation discipline.
How does a company deliver 100 consecutive quarters of revenue growth, maintain strong margins, and still lose three-quarters of its market value?
The answer is the TAM narrative.
The TAM Trap: Optimization vs. Expansion
The EDI software market is approximately $4 billion. SPS Commerce has been transparent about its broader opportunity, citing an $11 billion TAM that includes compliance management, revenue recovery, and vendor performance analytics. The company has made acquisitions to expand within this footprint: SupplyPike for Walmart supplier deduction management, Carbon6 for Amazon seller revenue recovery, Traverse for vendor performance management. These are smart, incremental moves that broaden the product suite and create cross-selling opportunities.
The problem is that the market doesn’t see these moves as TAM expansion. It sees them as TAM optimization. Revenue recovery tools and compliance management are extensions of the existing B2B supply chain ecosystem that SPS already serves. They deepen the moat within the current market rather than expanding the boundary of the market itself.
In a normal environment, that distinction wouldn’t matter much. Deepening a competitive position in a growing market is a perfectly good strategy. This isn’t a normal environment. In the SaaSpocalypse, the market is asking a single question about every software company: in an AI-first world, how big is your addressable market? For companies whose answer is “we’re growing nicely in the same TAM we’ve always been in,” the multiple compression has been brutal.
SPS Commerce’s 75% stock decline isn’t a reflection of poor execution. It’s a reflection of a company that has optimized brilliantly within its cubby hole while the world outside that cubby hole has changed dramatically.
And here’s the uncomfortable part that applies far beyond SPS: every SaaS vendor that has optimized brilliantly inside a narrow market is now trapped by that market. The skills that made a company dominant in one category don’t port cleanly to the next one. Twenty years of building the best EDI network in the world doesn’t automatically translate into the ability to compete in adjacent markets. Domain expertise in B2B supply chain compliance is not the same as domain expertise in DTC order orchestration. These are fundamentally different technical problems requiring fundamentally different architectures, and the assumption that a company can simply extend its current infrastructure into a new market has been the downfall of more software incumbents than anyone cares to count.
Breaking Out: How TAM-Trapped Vendors Find Adjacent Markets
The playbook for breaking out of a TAM trap is not complicated in theory. A company finds markets that are meaningfully larger than its current one, adjacent enough that existing customer relationships and domain knowledge provide a head start, and technically achievable through a combination of organic build and acquisition.
The critical distinction is that adjacency has to be real. Adding features that let a company upsell the same customer base is TAM optimization. Entering a market where it competes with a new set of incumbents for a new pool of budget is TAM expansion. The market can tell the difference instantly, and it prices accordingly.
Every SaaS company should be mapping its natural adjacencies along three dimensions. First, same buyer with a bigger problem: the customer already trusts the vendor, and the vendor can solve something more expensive for them. Second, same data with a new workflow: the vendor is already sitting on valuable data that powers a different product category. Third, same infrastructure with a different market: the core technology translates to a new set of customers. The best adjacencies hit two or three of these at once.
Then comes the strategic question that separates the companies that break out from the ones that stay trapped: build or buy. Organic entry into a genuinely new market takes years and carries massive execution risk. The companies already operating in the adjacent market have purpose-built architectures, existing customer traction, and hard-won domain knowledge that took them years to accumulate. For incumbents with strong balance sheets and compressed multiples, acquisition is often the fastest path to credible TAM expansion.
What This Looks Like for SPS Commerce
SPS sits on a massive B2B trading partner network and deep relationships with retailers and suppliers. Those are real assets. The question is which adjacent markets turn those assets into genuine TAM expansion rather than another round of TAM optimization.
Several natural adjacencies exist, and the right answer for SPS isn’t necessarily all of them. It’s picking the one or two that are genuinely larger, structurally different from the current market, and achievable through real product investment or acquisition, not a feature add.
DTC order operations and fulfillment orchestration is the largest adjacent market, with a software TAM estimated at $12-16 billion globally and roughly $60 billion when services are included. That’s 3-4x the size of the entire EDI software market. This is the technology that bridges a consumer clicking “buy” and the package arriving at their door: order ingestion from any channel (Shopify, Amazon, TikTok Shop, AI agents), intelligent routing to the optimal fulfillment node, real-time inventory synchronization across every node and selling channel, returns orchestration, and ERP reconciliation. The companies already winning here built single-platform architectures that combine connectivity and order management in one place, going live in weeks instead of months at a fraction of legacy OMS cost. The architecture is fundamentally different from legacy B2B EDI infrastructure.
Supply chain visibility and analytics extends beyond EDI document exchange into real-time tracking and performance management across the full supply chain. This overlaps with SPS’s existing data assets and extends into a market currently dominated by players like project44 and FourKites.
B2B marketplace enablement is growing as B2B commerce shifts toward marketplace and dropship models. The infrastructure to onboard suppliers, syndicate product data, and manage multi-party fulfillment is becoming a distinct market adjacent to traditional EDI.
Social and agentic commerce infrastructure represents the fastest-moving frontier. TikTok Shop is doing billions in GMV. AI agents are beginning to discover products and place orders on behalf of consumers via protocols like MCP (Model Context Protocol) and onX (Order Network eXchange). Both generate order volume that needs to be processed, fulfilled, and reconciled – and neither fits neatly into legacy B2B EDI architecture.
The point is not that SPS should chase all of these simultaneously. The point is that credible TAM expansion requires committing to at least one market that is genuinely larger and structurally different from the current one. The market will reward the commitment. It will not reward another incremental acquisition that deepens the same $10 billion cubby hole.
Expand or Compress
The SaaSpocalypse is a structural repricing of every software company based on a single variable: the credible size of the addressable market in an AI-first world. No amount of earnings beats, margin expansion, or share buybacks will fix a TAM that the market has decided is too small.
Every software company now faces the same binary choice: stay in the cubby hole, optimize within the existing TAM, and watch the multiple compress quarter after quarter. Or step outside the cubby hole, claim a dramatically larger market, and commit to earning the right to serve it: through building, through acquiring, or through both.
The window for making that choice is narrowing. Every week that a SaaS company spends optimizing within its current market is a week where AI-native players are building the agents that will compete for that market’s budget.
